Engaging China’s Cities and Consumers

Chinese firms marketing goods and services in the United States focus on customers and the cities they live in, rather than Congress, the President, or the Department of Commerce.

Both Americans and foreign businesses benefit from known and predictable legal institutions protecting property rights and contracts. Both the Chinese and U.S. central governments disrupt and distort trade relations between U.S. and Chinese firms and consumers.

U.S. firms investing in and marketing goods and services in China work with provincial and cities leaders and with local businesses. If local government officials have a reputation for corruption or incompetence, international businesses invest instead in other regions with better governance.

Similarly, economic growth is strongest in those U.S. cities and states with less corrupt and heavy-handed government.

Though many politicians and pundits blame China for America’s slow recovery since the 2008-2009 “Great Recession,” Texas and other states with lower taxes and lighter regulation have flourished. It is the high-tax states where the recovery has been unusually slow.

Texas, Florida, and other states across the south have seen steady economic growth, seemingly unhampered by imports from China. (This April 29, 2015 Brookings Institution article and paper looks at recent research on the influence of tax policy and state-level economic growth.)

In “The Texas Miracle Isn’t All About Oil” (The Federalist, June 9, 2016), Vance Ginn writes:

Since the last national recession started in December 2007, Texas has created 36 percent of all civilian jobs added nationwide in a state with less than 10 percent of the country’s population. 

Just as Dallas/Ft. Worth, Houston, Austin, and San Antonio lead the robust Texas economy (see “Fastest growing U.S. cities: Texas is king“), so in China it is dynamic major cities, not the central government, that are engaging the world economy.

In “China’s Key Cities: From Local Places to Global Players”  (December 1, 2015),  Xiangming Chen notes Shanghai (population estimate: 24 million!) is “the country’s financial and trade centre, largest port… and gateway to China’s huge domestic market.” Xiangming continues:

Besides Shanghai, a variety of other cities have become more important for China, and the world economy, for that matter. A number of these cities are well known for their significant historic and contemporary economic and cultural roles such as Guangzhou and Xi’an. Other cities have risen from unknown origins to prominent economic centres like Shenzhen.

In “Globalization Goes National,” (BloombergView, September 15, 2016) economist Tyler Cowen writes:

The Chinese economy has had a tendency to cluster around megacities, such as the Beijing-Tianjen-Hebei, Shanghai-Nanjing, or Guangzhou/Shenzhen/Hong Kong clusters. In the past, a Chinese port might have had better trade connections to Korea or California than to many parts of the Chinese interior. But these days the story in China is the rise and extension of national brands. The internet is bringing the whole country’s economy together through Alibaba, WeChat, and other services that ease the online purchase, shipping, and advertising of goods at the national level.

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